Abstract
In this paper we develop a financial model of competitive sectors in the presence of policy interventions in the form of taxes and price ceilings. The model yields the equilibrium asset, liability, and financial instrument price pattern. First, the variational inequality formulation of the equilibrium conditions is derived and then utilized to obtain qualitative properties of the equilibrium pattern. We then propose a computational procedure and establish convergence results. The algorithm decomposes the large-scale problems into network subproblems of special structure, each of which can then be solved exactly (and simultaneously) in closed form. Numerical results are also presented to illustrate the algorithm’s performance.
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© 1994 Springer Science+Business Media Dordrecht
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Nagurney, A., Dong, J. (1994). Variational Inequalities for the Computation of Financial Equilibria in the Presence of Taxes and Price Controls. In: Belsley, D.A. (eds) Computational Techniques for Econometrics and Economic Analysis. Advances in Computational Economics, vol 3. Springer, Dordrecht. https://doi.org/10.1007/978-94-015-8372-5_11
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DOI: https://doi.org/10.1007/978-94-015-8372-5_11
Publisher Name: Springer, Dordrecht
Print ISBN: 978-90-481-4290-3
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